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New Short Sale Program - Obama wanting to streamline short sales

March 8th, 2010 1:00 PM

In an effort to end the foreclosure crisis, the Obama administration has been trying to keep defaulting owners in their homes. Now it will take a new approach: paying some of them to leave.

This latest program, which will allow owners to sell for less than they owe and will give them a little cash to speed them on their way, is one of the administration’s most aggressive attempts to grapple with a problem that has defied solutions.

More than five million households are behind on their mortgages and risk foreclosure. The government’s $75 billion mortgage modification plan has helped only a small slice of them. Consumer advocates, economists and even some banking industry representatives say much more needs to be done.

For the administration, there is also the concern that millions of foreclosures could delay or even reverse the economy’s tentative recovery — the last thing it wants in an election year.

Taking effect on April 5, the program could encourage hundreds of thousands of delinquent borrowers who have not been rescued by the loan modification program to shed their houses through a process known as a short sale, in which property is sold for less than the balance of the mortgage. Lenders will be compelled to accept that arrangement, forgiving the difference between the market price of the property and what they are owed.

“We want to streamline and standardize the short sale process to make it much easier on the borrower and much easier on the lender,” said Seth Wheeler, a Treasury senior adviser.

The problem is highlighted by a routine case in Phoenix. Chris Paul, a real estate agent, has a house he is trying to sell on behalf of its owner, who owes $150,000. Mr. Paul has an offer for $48,000, but the bank holding the mortgage says it wants at least $90,000. The frustrated owner is now contemplating foreclosure.

To bring the various parties to the table — the homeowner, the lender that services the loan, the investor that owns the loan, the bank that owns the second mortgage on the property — the government intends to spread its cash around.

Under the new program, the servicing bank, as with all modifications, will get $1,000. Another $1,000 can go toward a second loan, if there is one. And for the first time the government would give money to the distressed homeowners themselves. They will get $1,500 in “relocation assistance.”

Should the incentives prove successful, the short sales program could have multiple benefits. For the investment pools that own many home loans, there is the prospect of getting more money with a sale than with a foreclosure.

For the borrowers, there is the likelihood of suffering less damage to credit ratings. And as part of the transaction, they will get the lender’s assurance that they will not later be sued for an unpaid mortgage balance.

For communities, the plan will mean fewer empty foreclosed houses waiting to be sold by banks. By some estimates, as many as half of all foreclosed properties are ransacked by either the former owners or vandals, which depresses the value of the property further and pulls down the value of neighboring homes.

If short sales are about to have their moment, it has been a long time coming. At the beginning of the foreclosure crisis, lenders shunned short sales. They were not equipped to deal with the labor-intensive process and were suspicious of it.

The lenders’ thinking, said the economist Thomas Lawler, went like this: “I lend someone $200,000 to buy a house. Then he says, ‘Look, I have someone willing to pay $150,000 for it; otherwise I think I’m going to default.’ Do I really believe the borrower can’t pay it back? And is $150,000 a reasonable offer for the property?”

Short sales are “tailor-made for fraud,” said Mr. Lawler, a former executive at the mortgage finance company Fannie Mae.

Last year, short sales started to increase, although they remain relatively uncommon. Fannie Mae said preforeclosure deals on loans in its portfolio more than tripled in 2009, to 36,968. But real estate agents say many lenders still seem to disapprove of short sales.

Under the new federal program, a lender will use real estate agents to determine the value of a home and thus the minimum to accept. This figure will not be shared with the owner, but if an offer comes in that is equal to or higher than this amount, the lender must take it.

Mr. Paul, the Phoenix agent, was skeptical. “In a perfect world, this would work,” he said. “But because estimates of value are inherently subjective, it won’t. The banks don’t want to sell at a discount.”

There are myriad other potential conflicts over short sales that may not be solved by the program, which was announced on Nov. 30 but whose details are still being fine-tuned. Many would-be short sellers have second and even third mortgages on their houses. Banks that own these loans are in a position to block any sale unless they get a piece of the deal.

“You have one loan, it’s no sweat to get a short sale,” said Howard Chase, a Miami Beach agent who says he does around 20 short sales a month. “But the second mortgage often is the obstacle.”

Major lenders seem to be taking a cautious approach to the new initiative. In many cases, big banks do not actually own the mortgages; they simply administer them and collect payments. J. K. Huey, a Wells Fargo vice president, said a short sale, like a loan modification, would have to meet the requirements of the investor who owns the loan.

“This is not an opportunity for the customer to just walk away,” Ms. Huey said. “If someone doesn’t come to us saying, ‘I’ve done everything I can, I used all my savings, I borrowed money and, by the way, I’m losing my job and moving to another city, and have all the documentation,’ we’re not going to do a short sale.”

But even if lenders want to treat short sales as a last resort for desperate borrowers, in reality the standards seem to be looser.

Sree Reddy, a lawyer and commercial real estate investor who lives in Miami Beach, bought a one-bedroom condominium in 2005, spent about $30,000 on improvements and ended up owing $540,000. Three years later, the value had fallen by 40 percent.

Mr. Reddy wanted to get out from under his crushing monthly payments. He lost a lot of money in the crash but was not in default. Nevertheless, his bank let him sell the place for $360,000 last summer.

“A short sale provides peace of mind,” said Mr. Reddy, 32. “If you’re in foreclosure, you don’t know when they’re ultimately going to take the place away from you.”

Mr. Reddy still lives in the apartment complex where he bought that condo, but is now a renter paying about half of his old mortgage payment. Another benefit, he said: “The place I’m in now is nicer and a little bigger.”

A version of this article appeared in print on March 8, 2010, on page A1 of the New York edition.

Posted by David Haley on March 8th, 2010 1:00 PMPost a Comment (0)

HAMP, HARP, 125% refinance program

March 3rd, 2010 8:28 AM

Well some good news bad news here... good news, the 125% Refinance program has been extended until June 30th 2011! So for all that are trying to reduce your interest rate / payment or go from an ARM to a fixed this program is here to assist if you are under water on what your home is now worth.

On to the bad news.... watch this video from the Think Big Work Small guys in regards to the statistics and facts about the HAMP, HARP programs.

http://www.thinkbigworksmall.com/mypage/player/tbws/24394/1338551

If you find yourself in a situation where the trial loan modification is not working out and you are needing to short sale to avoid foreclosure shoot me an email and I will refer you to a fantastic team who will assist you through this process. This is a time when you need full time trusted professionals in the real estate business!

Industry Seeks Extension of Federal Refinance Program

February 24, 2010

Mortgage industry groups are urging the Treasury Department to act quickly and extend the Home Affordable Refinance Program so that borrowers with high LTV or underwater mortgages still have an avenue to refinance and lower their payments. HARP is due to expire June 10. But the trade groups are concerned there could be disruptions if the program is not extended soon. "By April 1, lenders will no longer be able to extend even 60-day rate locks," according to a joint letter by five trade groups. Launched last April, HARP has facilitated the refinancing of nearly 190,000 Fannie Mae and Freddie Mac mortgages with loan-to-value ratios of 81% up to 125%. "HARP makes it easier for families to stay in their homes," the Feb. 18 letter says. "HARP also appropriately rewards borrowers who have worked hard to stay current on the mortgage loans" and "prevents unnecessary foreclosures." The American Bankers Association, American Financial Services Association, Consumer Mortgage Coalition, Housing Policy Council and Mortgage Bankers Association signed the letter.

Posted by David Haley on March 3rd, 2010 8:28 AMPost a Comment (0)

Foreclose Home - check this out look what one homeowner did!

February 25th, 2010 1:32 PM

Watch this video as a man losing his house did when foreclosure was coming.

Bulldozer???? video provided by KXLY Spokane, WA.

Posted by David Haley on February 25th, 2010 1:32 PMPost a Comment (0)

Chase Bank - Forced Insurance Policy

February 24th, 2010 9:12 AM

I was watching the ABC News last night when a very interesting story came on about a family who was having a difficult time providing for their home. As most of American families are in this current recession with unemployment being so high, main income providers are losing their jobs and the banks aren't even willing to assist in loan modifications.... even after they took the TARP funds that was suppose to go to troubled borrowers.

Here is the link on the interview: http://abcnews.go.com/WN/abc-world-news-homeowners-angry-expensive-fixed-place-insurance/story?id=9919670

So what does Chase Bank do.... just increase your insurance premium by doubling it and then making a profit on it by forcing their insurance policy on you when you are struggling to even put food on the table for your growing kids, if this happens to you what would you do? Yes, we should all have insurance on our property, but having one that is doubling it then on top of that knowing the family can't even make the mortgage payment, come on. How about speeding up the process on all the short sales that you (Chase) have in your loss mitigation dept. Now I am not here to just blast on Chase, but thought this was an interesting story.

I hope the Guys Frank Garay & Brian Stevens from Think Big Work Small get a hold of this because they seem to have a good following.

Posted by David Haley on February 24th, 2010 9:12 AMPost a Comment (0)

Buyer Tax Credit Ending Soon!

February 23rd, 2010 10:52 AM

To all buyers or move up buyers the end is coming.... April 30th of 2010 you must be in a signed around purchase and sale and close and fund by June 30th, 2010.

The IRS has a great website to utilize to find out the proper forms you should have your CPA or tax advisor assist you with for these forms.

Included is the link to streamline process. http://www.irs.gov/pub/irs-pdf/f5405.pdf

Posted by David Haley on February 23rd, 2010 10:52 AMPost a Comment (0)

Lawyer misconduct rises with foreclosure record

February 13th, 2010 3:04 PM

Ran across this article regarding homeowner's that are in a situation and they go out and hire legal counsel to help them do a loan modification or potnetial short sale.... this is from www.King5.com as we all know there are good people and bad people in every single profession no matter what is out there.

Take the time to do you research, investigate, question, dig, probe and always get recent referrals and recommendations from past clients.

Here is the link about the Lawyer Misconduct: http://www.king5.com/news/business/84306777.html

Posted by David Haley on February 13th, 2010 3:04 PMPost a Comment (0)

How IndyMac - One West Bank Got a Sweet Deal from our FDIC - Boy will this make you MAD!

February 11th, 2010 10:13 AM

This video link came over from the Think Big Work Small Guys - Frank Garay & Brian Stevens check out what they found out from a short sale agent that was trying to help out his client in Arizona - /Content.aspx?URL=www.thinkbigworksmall.com/mypage/archive/1/29027&LinkProp=4&FileName=HomePage.x

Posted by David Haley on February 11th, 2010 10:13 AMPost a Comment (0)

Home Prices on Shaky Ground - CNBC Video

February 1st, 2010 9:59 AM

This is a great video to watch as the owner of www.Trulia.com CNBC reporter and others talking about what is happening. Click links to watch

http://realestate.msn.com/article.aspx?cp-documentid=23289792&gt1=35000

Find out what Forbes magazine has rated Seattle for price values!

Posted by David Haley on February 1st, 2010 9:59 AMPost a Comment (0)

FHA - Increase in Up front Mortgage Insurance & Condo Spot Approval

January 26th, 2010 4:55 PM

For First Time Home Buyers who are looking at doing a FHA Home Loan, there is a new change that will impact the up front mortgage insurance premium that will be added to the loan amount. These changes will take place after April 5th, 2010.

FHA increases UFMIP from 1.75/1.5% to 2.25%:

Effective for FHA loans for which the case number is assigned on or after April 5, 2010, FHA will collect an upfront mortgage insurance premium of 2.25 percent. This policy change will increase premiums for purchase money and refinance transactions, including FHA-to-FHA credit qualifying and non-credit qualifying streamlined refinance transactions.

FHA Spot Condo Approval must have case# by Jan 31^st:

Hud has extended the deadline for spot condo approvals to loans with case #’s pulled by January 31^st, 2010.

After this deadline spot approvals will no longer be available.

What does this mean?

The whole condo project must be approved on Hud’s website. If it is not approved, Lenders must submit documentation to the local FHA center (Santa Ana, CA) for the entire project to be approved before you can secure an FHA mortgage in the complex.

This will cost money for the condo project and some time going through the process... but in the long run it will be well worth it, as it is becoming harder to find high LTV ( Loan to Value ) financing.

Posted by David Haley on January 26th, 2010 4:55 PMPost a Comment (0)

HAMP Can’t Keep Pace With Foreclosures Says NCRC

January 20th, 2010 3:00 PM

January 19, 2010

HAMP Can’t Keep Pace With Foreclosures Says NCRC

As Wall Street bonus season begins, the foreclosure crisis continues into its fourth year largely unabated. Last year saw 10 straight months of over 300,000 foreclosure filings, and 2.8 million homes went into foreclosure, according to Realty Trac.

The news that only 66,000 borrowers have received permanent loan modifications under the Home Affordable Modification Program confirm that the existing responses to the foreclosure crisis can not keep pace with the number of Americans losing their homes.

Meanwhile, financial lobbyists continue to fight against strong measures to provide strong oversight of the financial system and mitigate the damage caused by reckless and irresponsible lending and securitization practices, even as their CEOs told the Financial Crisis Inquiry Commission that they support financial regulation.

“The response to the foreclosure crisis has been like that Marx Brothers movie where in the heat of a battle they shout that ‘help is the way’ over and over again, but the response is humorously small. Except that there’s nothing humorous about foreclosure,” said John Taylor, president and CEO of the National Community Reinvestment Coalition.

“Serious people inside and outside the administration have thought this through, and we all understand that a more substantial response is needed. The question is: Does the political will exist to force the banks to modify loans? Tough talk and action on bonuses and repayment of bailout funds should be accompanied by a stronger response on foreclosure prevention. This is an important pocketbook and a political issue for millions of Americans, and failure now means growing disillusionment.”

Mr. Taylor said the financial services lobby has so far successfully staved off serious reforms.

“They killed bankruptcy reform twice, indefinitely stalled action on predatory lending, weakened the Consumer Financial Protection Agency in the House and appear to be getting their way in the Senate, and have refused to put the required resources into making the HAMP program work,” he said.

“It’s time to take the gloves off and pass some measures that actually help Americans. If it takes a prime time address or other extraordinary measures by the president to pop the bubble of denial about responding to the financial crisis that seems to be hovering over the Capitol, then so be it.”

Several needed measures should be considered to address the foreclosure crisis. Congress and the administration are clearly moving to address unemployment, the fastest growing contributor to the foreclosure crisis, according to Mr. Taylor. The Treasury Department should also considering purchasing loans at a discount and mandating their modification as NCRC has proposed. This does not require legislative approval, and could be done tomorrow. Bankruptcy reform, which would provide additional relief for homeowners facing foreclosure, should be re-enacted in Congress with a push from the administration, he said.

Provided by ManangingREO

Posted by David Haley on January 20th, 2010 3:00 PMPost a Comment (0)